The Smart Money: The cost of global climate change in the midcoast

Global climate change isn’t just a nuisance, it’s going to cost a lot of money, too. This week we’ll look at the cost of global warming to our towns, starting with the Federal National Flood Insurance Program (NFIP), which is part of the Federal Emergency Management Act, or FEMA.

FEMA creates flood maps, which purport to show high water marks for so-called “100 year events”, which really means in any given year, there is a one in 100 chance of reaching that mark. If one’s property lies above the mark, well and good; if it does not, one is required to purchase flood insurance. Ordinary homeowners’ insurance doesn’t protect against floods, hurricanes, or a few other hazards, such as earthquakes.

For most people, flood insurance isn’t too expensive and is probably a good investment. Anyone can be struck with a freak event such as a storm that drops 20 inches of rain in a day. But in some cases, flood insurance can be very pricy, because the property in question lies in a region where storm surges from a body of water such as a river or ocean, occurs simultaneously with rainwater that is slow to drain back to the water body. When that happens, the water backs up and can engulf whole neighborhoods.

Until recently, flood insurance costs were mitigated — that is, people who lived on the coasts or along rivers got a lower rate than they should have been able to receive based on the risk, making it possible for people of modest means to hang onto shorefront property. As storm after storm hit the coastlines, from Katrina to Sandy, people were able to rebuild in the same risky beachfront locations. The cost of their premiums and the premiums of others on the NFIP was not enough to pay for the damage caused, so the federal government — and thus American taxpayers — picked up the balance.

But beginning with Katrina, the storms became larger and fiercer and a lot more expensive. Among the reasons are that there is a strong correlation between surface sea temperatures and the destructive ability of a hurricane. Katrina, Rita, Wilma, Irene, and Sandy in particular were massive storms. They came late in the season when the water temperature was at its warmest. New Orleans is below sea level. So there is more at play than the possibility of global climate change, but in truth, that is the likely cause of the stronger storm patterns the U.S. has been seeing in the last decade.

The costs of the larger storms in the last decade have also escalated, owing in large part to the spate of building along the coasts, especially expensive commercial building. Numerous casinos and hotels were taken out by Wilma, Katrina, and Rita. Irene and Sandy occurred in places that were not prepared for hurricanes — inland New York State and Vermont in the case of Irene, and New Jersey, Staten Island, Manhattan in the case of Sandy — having had them only sporadically and not since the large building booms of the last 50 years. This also meant that the recovery was slower and more expensive, as the costs to house people who had been displaced escalated.

In the case of Hurricane Sandy in particular, the costs overwhelmed the new, austerian post-2008 American economy in which every new expenditure had to be offset by spending cuts in other programs. There was a considerable political struggle involved in getting federal help, something unheard of during such an emergency. The affected communities had to wait for nearly three months to get assistance. Because the storm occurred so late in the season, this meant that families were in shelters throughout the coldest part of the winter and through the Christmas holidays in 2012.

Of the 10 most expensive hurricanes on record, six of them have occurred in the last decade, three of those in one year —2005.

2005: Katrina $125 billion

2005: Rita $12 billion

2005: Wilma $29 billion

2008: Ike $37 billion

2011: Irene $15.8 billion

2012: Sandy: $71 billion

So even though the process wasn’t really tied to the number and ferocity of storms, it made sense for FEMA to re-draw their coastal flood plain maps. Pre-”firm” (Flood Insurance Rate Map) buildings — built long before flood maps to no standards at all — were coming off the “grandfather” list and were beginning to be charged the rate it would actually cost to replace homes. But the affordability of the insurance tanked, so they had to reconsider the program. In Harpswell, there were cases where pre-firm houses went from a flood premium of $500 per year to $36,000 per year.

Several categories of buildings didn’t and won’t have their insurance costs rolled back. Businesses, secondary homes, and buildings that have incurred more damage than the fair market value of the building will keep the new, higher rates. Many buildings that were not on flood maps in 1986 or 1992 will be on flood maps now, thanks to better topography on the coast. Some who have been paying flood insurance will drop off the maps, though not many.

In Bath, much of downtown will be in the flood plain, and much of BIW will be as well. Arrowsic, Georgetown and Phippsburg will all have new land in the flood zones, as will Woolwich and West Bath. Topsham’s riverfront area will be in the flood zone, and so will Bowdoinham’s Merrymeeting Bay waterfront. It’s difficult to tell how many structures will be affected by the new insurance rates.

Towns have a 90-day period to review and appeal. If no appeals are lodged, the final maps will go into effect in July of 2015.

So far, no one has appealed.

Sue Baker of the National Flood Insurance Program said that the new maps and methodology will try to balance risk and affordability. But she offered a bit of advice for those who are likely to find themselves in a flood plain. “Buy your insurance while you still have a preferred risk,” she said. “When the insurance flips to the flood zone, you’ll be grandfathered in at a lower rate.”

That will help coastal residents keep their property affordable for a while longer, but in the end, actions must be taken to solve the problem, whether it is moving the structure to higher ground or jacking up the house so that the lower floor isn’t at risk.

What is not being considered — yet — is sea level rise. “Scientists are looking at it, but so far there is no real consensus on how sea level rise affects the flood plain, and how we should calculate it into flood insurance rates,” Baker said. She didn’t rule out that future flood maps may include sea level rise.